IATA appeals for ‘urgent government action’ in the Middle East and Africa

By Andrew Pentol |

Empty plane new

IATA is seeking emergency support from governments in the Middle East and Africa as part of a worldwide campaign to support airlines during the Covid-19 pandemic.

The International Air Transport Association (IATA) is appealing to governments in Africa and the Middle East, as part of a worldwide campaign, to provide emergency support to airlines, as they fight for survival.

As extensively reported by this publication, the disappearance of air travel due to Covid-19 is crippling carriers worldwide.

According to IATA, emergency aid of up to $200bn could be required on a global basis to mitigate the financial impact of the pandemic.

In the Middle East and Africa, IATA says extensive cost cutting measures are being implemented. But due to flight bans and international and regional travel restrictions, airline revenues are plummeting — outstripping the scope of even the most drastic cost containment measures.

With average cash reserves of approximately two months in the region, airlines are facing a liquidity and existential crisis.

SEVERAL OPTIONS ON THE TABLE

IATA, therefore, is proposing several options for governments to consider. The first is direct financial support to passenger and cargo carriers to compensate for reduced revenues and liquidity, attributable to travel restrictions as a result of Covid-19.

Another option is loans, loan guarantees and support for the corporate bond market by governments or central banks. IATA acknowledges the corporate bond market as a vital source of finance, but believes the eligibility of corporate bonds for central bank support must be extended and guaranteed by governments to provide access for a wider range of companies.

A third proposal is tax relief and rebates on payroll taxes paid to date in 2020 and/or an extension of payment terms for the rest of 2020. This is in addition to a temporary waiver of ticket taxes and other government-imposed levies.

“Stopping the spread of Covid-19 is the top priority of governments. But they must be aware that the public health emergency has now become a catastrophe for economies and for aviation.

“The scale of the current industry crisis is much worse and far more widespread than 9/11, SARS or the 2008 Global Financial Crisis. Airlines are fighting for survival. Many routes have been suspended in Africa and Middle East and airlines have seen demand fall by as much as 60% on remaining ones.

Airline shot for IATA Covid-19 story

At present, the economic contribution of Africa’s air transport industry is estimated at $55.8bn, supporting 6.2 million jobs.

“Millions of jobs are at stake. Airlines need urgent government action if they are to emerge from this in a fit state to help the world recover, once Covid-19 is beaten.”

Muhammad Al Bakri, Regional Vice President Africa, Middle East, IATA added: “Several governments in Africa and the Middle East have already committed national aid for Covid-19 including Saudi Arabia, the United Arab Emirates, Qatar, Bahrain, Egypt, Nigeria and Mauritius.

“Our ask is that airlines, which are essential to all modern economies, are given urgent consideration. This will help keep them alive and ensure airline staff — and people working in allied sectors — have jobs to come back to at the end of the crisis.

“It will enable global supply chains to continue functioning and provide the connectivity that tourism and trade will depend on if they are to contribute to rapid post-pandemic economic growth.”

At present, the economic contribution of Africa’s air transport industry is estimated at $55.8bn, supporting 6.2 million jobs and contributing 2.6% to GDP. In the Middle East, the economic contribution of air transport is estimated at $130bn supporting 2.4 million jobs and contributing 4.4% to GDP.

INTERNATIONAL BOOKINGS IN AFRICA DROP 20%

As part of its analysis of the Covid-19 pandemic, IATA provides a comprehensive overview of the impact of the crisis in Africa and the Middle East. It also forecasts the potential impact of Covid-19 on a country-by country-basis.

Since the end of January, thousands of passenger flights have been cancelled in Africa, the Association indicates. In the coming weeks and months, IATA expects this number to increase exponentially. This is due to the likely implementation of additional measures in different countries.

International bookings in Africa have also dropped around 20% for March and April. Domestic bookings have decreased by about 15% in March and 25% for April, according to latest data.

African airlines have also lost $4.4bn in revenue as of 11 March 2020, while ticket refunds have increased by 75% in 2020 between 1 February and 11 March compared to the same period in 2019.

In South Africa, where the likes of Tourvest Retail Services and Big Five have DF&TR business, disruption from Covid-19 could result in a 6 million loss in passenger volume and $1.2bn loss in base revenues. Disruptions to air travel could also put over 102,000 jobs at risk.

South African Airways for web

South African Airways has suspended all international flights until the end of May.

Disruption in Kenya could also lead to a 622,000 loss in passenger volume and $125m loss in base revenues. Over 36,800 jobs could be at risk and if the situation intensifies, around 1.6 million passengers and $320m in revenue could be lost.

Over in Ethiopia, the loss in passenger volume and base revenues could amount to 479,000 and $79m respectively. IATA also suggests 98,400 jobs could be at risk and that 1.2 million passengers and $202m in revenue could be lost if the virus spreads.

In Nigeria, the impact of Covid-19 could result in an 853,000 loss in passenger volume and $170m loss in base revenues. Disruption to air travel could put over 22,200 jobs at risk and if the virus spreads further, 2.2 million passengers and $434m in revenue could be lost.

Elsewhere in Africa, disruption in Rwanda could prompt a 79,000 loss in passenger volume and $20.4m loss in base revenues. IATA says that 3,000 jobs could be in jeopardy and that around 201,000 passengers and $52m in revenue could be lost if the situation worsens.

More to follow…

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